Ahead of the Curve provides you with analysis and insight into today's global financial markets. The latest news and views from global stock, bond, commodity and FOREX markets are discussed.

About

Ahead of the Curve provides you with analysis and insight into today's global financial markets. The latest news and views from global stock, bond, commodity and FOREX markets are discussed. Rajveer Rawlin received his MBA in finance from the Cardiff Metropolitan University, Wales, UK. He is an avid market watcher having followed capital markets in the US and India since 1993. His research interests includes areas of Capital Markets, Banking, Investment Analysis and Portfolio Management and has over 20 years of experience in the above areas covering the US and Indian Markets. He has several publications in the above areas. The views expressed here are his own and should not be construed as advice to buy or sell securities.

The S and
P 500 and the Nifty fell last week. Indicators are bearish for the upcoming
week. Quantitative tightening by the FED is yet to be priced in fully. The
markets are still trading well over 3 standard deviations above their long term
averages from which corrections usually result. Under performance in high yield and
other risk assets are flashing warning signs. An interest rate shock can’t be
ruled out. Indian market volatility is still below US market volatility so
there is complacency and some catch up left on the down side. The critical
levels to watch are 2765 (up) and 2740 (down)
on the S & P and 10300 (up) and 10100 (down) on the Nifty. A significant breach of the
above levels could trigger the next big move in the above markets. You can check
out last week’s report for a comparison. Love your thoughts and feedback.

Rajveer Rawlin received his MBA in finance from the Cardiff Metropolitan University, Wales, UK. He is an avid market watcher having followed capital markets in the US and India since 1993. His research interests includes areas of Capital Markets, Banking, Investment Analysis and Portfolio Management and has over 20 years of experience in the above areas covering the US and Indian Markets. He has several publications in the above areas. The views expressed here are his own and should not be construed as advice to buy or sell securities.

Wednesday, 14 March 2018

A look at the relationship of bitcoin (#bitcoin) one of the most risky asset classes with other asset classes over the last year reveals some interesting details. We can say with almost 100% certainty that bitcoin shows a strong positive relationships with most asset classes and the ten year bond yield and a strong negative relationship with copper. This suggests that the recent sell off in bitcoin could be a precursor to a major risk off trade:

Bitcoin Vs Other
Asset Classes

Correlation

Significance

S & P 500

0.860

0.000

Ten Year Bond Yield

0.530

0.000

Euro

0.673

0.000

Gold

0.476

0.000

Copper

-0.879

0.000

Crude Oil

0.800

0.000

A look at the relationship between bitcoin returns and other asset class returns over the last year however paints a different picture. There is a weak inverse relationship between bitcoin returns and the 10 year bond yield changes but the relationship between other asset class returns and bitcoin returns is not statistically significant. This suggests a continued melt down in bitcoin is a precursor to lower bond yields which could occur due to a flight to quality out of risky assets:

Rajveer Rawlin received his MBA in finance from the Cardiff Metropolitan University, Wales, UK. He is an avid market watcher having followed capital markets in the US and India since 1993. His research interests includes areas of Capital Markets, Banking, Investment Analysis and Portfolio Management and has over 20 years of experience in the above areas covering the US and Indian Markets. He has several publications in the above areas. The views expressed here are his own and should not be construed as advice to buy or sell securities.

Refurbished MacBooks

My Asset Allocation Strategy (Indian Market)

My belief is that stocks are relatively overvalued compared to bonds and attractive buying opportunities can come along after 1-2 years. In a deflationary scenario no asset class does well other than U.S bonds, the U.S dollar and the Japanese yen, so better to be safe than sorry with high quality government bonds and fixed deposits. Cash is the king always. Of course this varies with the person's age.